AZ Regulator Accused of Tampering with Southwest Merger
The bloody battle over the right to merge with Southwest Gas
Corp. has recently claimed another victim: Arizona Corporation
Commissioner (ACC) Jim Irvin. Federal and state authorities are
investigating allegations that the state regulator illegally
influenced Southwest Gas to go with Oneok Inc. as a merger partner
instead of rival suitor Southern Union Co.
The U.S. Attorney's Office, the FBI and the Maricopa County (AZ)
Attorney's Office are probing the allegations that were brought by
Southern Union "in concert with certain individuals within the
Arizona Corporation Commission," a knowledgeable source told NGI.
While the source confirmed a criminal investigation was ongoing,
he and others refused to disclose further details. "[These three
offices] are looking into a matter that involves the Arizona
Corporation Commission. I will make no other comment," said Bill
FitzGerald, a spokesman for the Maricopa County Attorney's Office.
"It would be totally inappropriate for us to [comment] at this
point," said a spokeswoman for the U.S. Attorney's Office in
The investigation sprang out of a civil action filed in July by
Southern Union and certain unnamed members of the ACC, accusing
Irvin of improperly using his position as then-chairman of the
Arizona commission to nudge Southwest Gas toward Oneok, a Tulsa,
OK-based LDC. The lawsuit calls for $750 million in damages.
Both Oneok and Southern Union of Austin, TX, have been in a
fierce bidding war to acquire Southwest Gas. Last December,
Southwest - which serves gas users in parts of Arizona, Nevada and
California - selected Oneok as its buyer, even though Southern
Union had bid higher for the company ($32 per share vs. $30 per
share from Oneok). Southwest's board of directors at the time
expressed doubts about whether Southern Union could finance the
deal and whether it could obtain the needed regulatory okays.
The lawsuit contends Irvin got Southwest Gas' board to accept
Oneok's merger proposal by strongly suggesting that a Southern
Union deal would run into problems at the regulatory level. "The
facts of this case will expose the absurdity of this claim," the
Arizona regulator responded in a prepared statement.
Irvin vehemently disavowed all charges. "I categorically deny
each and every civil and criminal allegation, and am confident my
actions were not only within the confines of state and federal law,
but were taken on behalf of the interests of the Arizona consumers
Irvin said the lawsuit was politically and financially
motivated. ".It is clear to me that Southern has been working in
conjunction with individuals within the Commission to apply the
political pressure necessary in thwarting consideration of the
Southwest-Oneok merger. Again, this attack on my reputation from
entities outside of and within this Commission will not go
Some of the allegations were made in affidavits provided by
James Fisher, an executive assistant for a former commissioner,
according to Irvin. Fisher "has a history of wrongdoing at the
Commission.....[His] prior actions cast serious doubt on his
credibility as a witness for Southern," he said.
The allegations are an act of "political gamesmanship," which
Irvin says "is no stranger to this commission." In the past couple
of months, Irvin was forced to step down as chairman after the two
then-Commissioners Tony West and Carl J. Kunasek threatened to vote
him out; Commissioner West was removed from office by the Arizona
Supreme Court for holding a valid securities license; and now Irvin
finds himself the target of a civil lawsuit and criminal
investigation. Even the most loyal of staff members characterize
the commission as being in a state of "chaos."
As to the status of the Southwest Gas-Oneok merger, the Arizona
commission plans to take it up again in early September. It had
intended to address the transaction at a hearing in July, but that
was postponed when news of the criminal investigation broke. The
proposed marriage has been approved by Nevada regulators, but it
still awaits action in California.
John Norris, Susan Parker